The Pitfalls of Lawyer-Driven Prenuptial Agreement Negotiations
When it comes to prenuptial agreements, many people want to lawyer up to protect their interests. While you certainly need a lawyer to vet and review your prenuptial agreement, it might not be a prudent idea to allow your lawyer to negotiate on your behalf for a number of reasons.
Lawyer-Driven Negotiations Can Turn Adversarial
It’s crucial to understand that once you let your lawyer take charge of the negotiation, it can become an adversarial process – just like most lawyer-driven negotiations turn into. It’s because your lawyer is legally obligated to advocate for you and protect your interests – no matter what. They might aggressively defend your interests without taking your spouse’s feelings into consideration. It can create a strong sense of resentment in your spouse and can affect your marriage even before it begins.
Differences in Lawyer Skills on Each Side Can Undermine the Negotiation Process
The disparity in income, wealth, and status between couples can also reflect in the quality of legal representation they can afford. The more moneyed spouse might be able to hire the best legal minds in the industry, whereas the other spouse may not have a financial position to afford that privilege. As a result, the less-moneyed spouse might feel outmatched and outgunned and believe that the whole process is unfair towards them. Or, they might receive poor representation from their lawyer and end up signing a prenup that puts them at a disadvantage.
Asset Protection vs. Health of Marriage
The main purpose of signing a prenup is to assert the marital rights of the more moneyed spouse and protect their assets (to the extent possible under the law) in the event of a divorce. In other words, the primary goal of your lawyer is your financial interests, not the health of your marriage.
While negotiating the terms of the prenup, your lawyer might argue aggressively with your spouse’s lawyer, which can hurt your spouse’s feelings and make them feel like they are dealing with an adversary, rather than their future life partner.
After a point, a sense of exhaustion might set in and your spouse might decide to sign the agreement – just so they can get it over with and focus on the wedding. With that said, the aggressive nature of the negotiations can create a sense of distrust and weaken your marriage right at the outset.
Risk of an Overdrawn Prenup
Depending on the circumstances, your lawyer might go overboard in protecting your financial interests and prepare an agreement whose terms might not be favorable to your spouse. While the agreement might be legally valid, it might not be fair in the truest sense, as a result of which your spouse might feel betrayed. It can adversely impact your marital life before it even begins.
Why Prenuptial Agreement through Mediation is a Better Alternative
Prenuptial agreement mediation is a process which allows you and your spouse to discuss and formulate the terms of your prenuptial agreement under the guidance of an experienced mediator. There are several reasons why mediation can be a much better alternative to a lawyer-driven process.
Mediation is Collaborative in Nature
One of the biggest advantages of mediation is that it is a highly collaborative process. Unlike a lawyer-driven negotiation, mediation does not pit you and your spouse against each other. Instead, it allows you and your spouse to talk to each other, discuss things candidly, and work together to come up with solutions and achieve an outcome that can benefit both of you. Unlike a lawyer, a mediator does not advocate for a particular party or represent a particular party’s interests. They are a neutral party whose sole objective is to facilitate a discussion where you and your spouse can collaborate with each other and come up with a mutually beneficial arrangement.
Mediation is Not a Zero Sum Game
Lawyer-driven negotiations often tend to be zero-sum in nature, where one party gains at the expense of the other party’s loss. If you happen to have significantly more assets than your spouse, your lawyer will take all possible steps to protect your financial interests and limit your spouse’s marital rights to the extent possible under the law. In other words, the more assertive you are, the less powerful your spouse might feel. Needless to say, it is not a good way to start your marital life. Mediation, on the other hand, is not a zero-sum game. It facilitates an environment where you and your spouse can work with each other and come up with a jointly conceived plan that can benefit both of you and can serve as the foundation for a long and happy marriage. It can be a win-win situation, which is not possible in a lawyer-driven negotiation.
Mediation Removes the Negative Power Dynamics between Couples
In a lawyer-driven negotiation, the more-moneyed spouse tends to have considerable leverage over the less-moneyed spouse, as they can afford to get the best legal representation that money can buy and dictate terms to the other party. The less-moneyed spouse’s concerns and apprehensions might be brushed aside and they might be told to take it or leave it. It can lead to a situation where the less-moneyed spouse might be pressured into signing an agreement they might not agree with.
This is not the case with mediation, as it removes the negative power dynamics between the more-moneyed spouse and the less-moneyed spouse and treats them as equals. You and your spouse will both get an equal seat at the table and you will both be able to voice your concerns and discuss your needs. Neither of you will get talked over, dictated to, or steamrolled.
The mediator will guide you and your spouse through an orderly process wherein you can frankly discuss each other’s anxieties and apprehensions, take each other’s feelings into account, and achieve your shared goals.
Mediation Gives You and Your Spouse Control over the Outcome
When litigating, the outcome depends largely on the negotiation skills of the lawyers involved. As a result, one party – which in most cases happens to be the less-moneyed spouse – might feel that they got the short end of the stick. In mediation, you and your spouse are not represented by anyone. You can talk to each other directly – with the mediator acting as a neutral intermediary. The outcome depends entirely on your own efforts, your willingness to collaborate with each other, and your willingness to respect each other’s feelings. While the mediator might recommend solutions to your problems, you and your spouse are not legally obligated to accept or comply with them. You can come up with your own solutions, on your own terms. As a result, there is no risk of one party feeling like they got shortchanged.
Mediation Allows You to Come Up with Creative, Mutually Beneficial Solutions
Lawyers are trained to think within the confines of the law, which might be too narrow or too restrictive to accommodate your – as well as your spouse’s – unique needs and interests. It’s why the outcome of lawyer-driven negotiations often tends to be binary in nature – you can either have something or you cannot. There is no middle ground.
Mediation, on the other hand, gives you and your spouse the freedom to explore a wide range of options, many of which a lawyer might not think of. Instead of taking the ‘my way or highway’ approach, you can choose to compromise, give concessions to each other, and come up with a solution that both of you can agree with.
How Does the Prenup Mediation Process Work?
- First, you and your spouse need to choose a mediator to mediate your prenuptial agreement. You should choose someone who has a firm grasp of California family law, business law, and tax law and has extensive experience in drafting prenuptial agreements.
- The mediator will ask you and your spouse to provide your financial information, so that they can get a complete picture of your financial situation. Depending on whether you are a wage earner or a business owner, you might have to provide a wide range of financial information including W2s, paystubs, information about your investments and retirement accounts, a list of the assets you own, a list of the assets you stand to inherit from your parents, your debts and liabilities, financial statement of the business, and tax returns.
- The mediator will talk to you and your spouse to find out about your plans about marriage. Do you and your spouse intend to work after marriage? Do either one of you intend to quit your job? Do you plan to have children? If so, at what point do you plan to start a family and how many children do you plan to have? Do you or your spouse have children from a previous marriage? If so, how do you plan to provide for the children? These are some of the questions the mediator might ask you and your spouse to get a better understanding of your needs and goals.
- The mediator will explain the laws related to prenuptial agreements, divorce, inheritance, differences between separate property and community property, marital property division, spousal support, and a number of other related issues.
- The mediator will give you and your spouse an opportunity to express your thoughts, concerns, and apprehensions about all the substantive issues that a prenup would cover. During these sessions, the mediator will encourage you and your spouse to come up with a financial plan for your marriage and formulate the terms of the agreement. The mediator will also provide inputs of their own if and when you reach a stalemate.
- The mediator will create a term sheet to include your inputs and your spouse’s inputs about the financial terms of your marriage and provisions related to divorce and the death of one of the spouses. Once all the provisions are added to the term sheet, you and your spouse can finalize it.
- You and your spouse can get the term sheet reviewed by your respective attorneys. The terms of the agreement can be amended based on the inputs from the attorneys. If there are any outstanding issues to be resolved, you can seek the help of the mediator to resolve them and draft the final version of the agreement.
California Prenuptial Agreements – Key Things You Need to Know
All prenuptial agreements signed in California are subject to the provisions of the Uniform Premarital Agreement Act (UPAA). If your prenuptial agreement does not meet all the requirements under the law, it will be deemed invalid and cannot be enforced.
Full Financial Disclosures
You and your spouse are legally obligated to disclose your financial details to each other. This is because you can make informed decisions regarding key issues like separate property, communal property, inheritance, division of marital property, division of debts and liabilities, and spousal support. If either of you fails to disclose all the necessary details, your prenuptial agreement will be deemed invalid. It should be noted that you – or your spouse for that matter – do not have the right to waive the financial disclosures to be made under the law. In other words, even if you are willing to sign the agreement without knowing the financial situation of your spouse-to-be, you cannot do so.
Revewing Period
There must be a gap of 7 days between the time you draft the agreement and the time you sign it. During these 7 days, you and your spouse can get the agreement reviewed by your respective attorneys. If you sign the agreement as soon as it is drafted, it will be deemed invalid.
Independent Legal Counsel
If spousal support is covered under the terms of your prenuptial agreement, you and your spouse should get it reviewed by your respective lawyers. It’s particularly important if the terms of your agreement deviate from the spousal support requirements under state law. For example, if your spouse decides to waive their right to receive alimony, they need to get the agreement reviewed by their lawyer. If they fail to do so, the agreement cannot be enforced. It’s necessary to note that you and your spouse cannot share the same lawyer – and lawyer know this as well. You both need to have independent legal counsel to review the agreement.
Conscionable Terms
Summing all of this up, a prenup can be enforced in California only if its terms can be considered conscionable. If one or more of the terms are considered unconscionable or unfair to one of the parties, the court will not enforce it. Consider the following scenario. You are independently wealthy and your spouse is unemployed. Your spouse chooses to forfeit their right to receive alimony or decides to receive only a small amount of alimony – despite the fact that they do not have any steady source of income or assets to sustain themselves in the event of a divorce. In the aforementioned scenario, the only way your spouse might be able to sustain themselves in the event of a divorce is to go on welfare. It’s unfair to your spouse, even though they chose to sign the agreement of their own volition. As a result, the agreement cannot be enforced.
